Energy - overview

From 1 October 2008 all properties - homes, commercial and public buildings - when bought, sold, built or rented need an energy performance certificate ('EPC'). Larger public buildings will also need to display an energy certificate ('DEC').

The exemptions are narrow and relate to:

The definition of 'building' includes 'a reference to part of a building which has been designed or altered to be used separately'. Although not a model of clarity, this seems to mean that if one tenant in a multilet building decides to assign or sublet its premises, the entire building will have to be assessed.

The regulations impose a specific duty on every party with an interest in, or in occupation of, the building to allow access to any energy assessor appointed by the party with a duty to obtain an EPC or to ensure that an air-conditioning system is inspected. Fortunately, the regulations provide a 10-year lifespan for EPCs once they have been obtained. Consequently, unless the building and its fixed services are subsequently altered, an EPC triggered by one assignment or underletting ought to be readily available for use in any subsequent transactions.

The certificate provides energy efficiency A-G ratings and recommendations for improvement. The ratings are similar to those found on products such as fridges and are standard so the energy efficiency of one building can be compared with another building of a similar type. A revised version of the EPC for domestic buildings is to be introduced in April 2012 to make it easier to understand. The changes made to address the issues identified by DCLG include:

EPCs were first introduced for the marketing and sale of domestic homes, as part of the Home Information Pack (since abolished by Localism Act 2011). Since October 2008 all buildings whenever built, sold or rented require one, although the requirement to obtain one pre-marketing only applies to sales of domestic property. From 6 April 2012, the requirement to commission an EPC before a building is marketed (where no valid EPC exists) extends to:

EPCs must be produced by accredited energy assessors using approved software. The information required includes the building's dimensions, its orientation, the use to which each part is put, the number of floors, the amount and type of glazing (single or double) and details of the heating systems and of the fuel used.

For commercial property, there are also mandatory inspections to ensure air conditioning systems are carefully managed and maintained. All air-conditioning systems over 12 kW must have had a first inspection by 4 January 2011. The inspection included an assessment of the efficiency of the system with advice on improvements or replacements, as well as alternative solutions. From 6 April 2012 it will be mandatory for the person who controls the system to lodge the inspection report on the England and Wales central register. An energy assessor who issues an inspection report must ensure that it is entered on the register before giving the documents to the person in control of the system.

'Total useful floor area'

The EPC Regulations use the phrase 'total useful floor area'. This means the gross internal floor area of all enclosed spaces in the building and is a different measure from the net internal floor area commonly used for purposes such as fixing the initial rent or service charge or at rent review. Consequently, measurements will need to be checked to ascertain whether an EPC or DEC is required.

Recovering costs

The EPC Regulations do not provide guidance on whether landlords can pass the cost of obtaining EPCs to their tenants (apart from making it clear that, in the case of a new lease, the tenant must not pay for this cost). It is always necessary to look at the lease, to see what the service charge provisions cover.

Leases granted before 2008 are unlikely to refer to the cost of obtaining EPCs and it will therefore be necessary to decide whether the cost can be accommodated under another heading. In most cases, the landlord is unlikely to be able to say that the EPC is a benefit to the tenants - although, on occasion, the tenants may wish to make use of the landlord's EPC if they are assigning or underletting their own premises. For new lettings, it is for the parties to negotiate whether the landlord can recover the cost of the EPC through the service charge.

The EPC assessment is accompanied by a set of recommendations for improving the energy performance of the building. Similar provisions apply to the inspection reports relating to air-conditioning systems. Importantly, in each case, these will constitute recommendations and not requirements. Consequently, should a landlord elect to follow the recommendations, it will have no mechanism for recovering costs from its tenants. There will no doubt also be arguments at the end of leases should landlords try to pick up as 'dilapidations payments' part or all of the cost of improving energy performance.

Enforcement

Trading standards officers are responsible for enforcing the requirement to provide an EPC prior to sale or rent.

The maximum sanction under the legislation is a civil penalty that is equal to 12.5% of the rateable value of the property (with a minimum of £500 and a maximum of £5,000). If the building has no rateable value, the fine will be £750. If an EPC is not commissioned despite enforcement action it seems that the trading standards officer may be able to levy a further penalty of up to £5,000, which could be repeated until an EPC is provided.